There has been much speculation around whether Chancellor Rishi Sunak will increase capital gains tax rates during tomorrow’s budget, which could result in business owners and individuals paying significantly more when they come to sell assets.
The increase looms despite HMRC receipts from CGT having risen by 62 per cent in the last five years, from £7.1bn in 2015/16 to £11.5bn in the last twelve months, an all-time record high in a twelve-month period, new figures shared exclusively with City A.M. reveal.
The data, compiled and shared by accountancy firm Haysmacintyre, shows CGT receipts have continued to rise despite the effects of the Covid-19 pandemic.
Some critics have pointed out that a further rise in taxes now, which would be on top of the new health and social care levy announced last month, could undermine the Government’s efforts to grow the economy post-lockdown.
Katharine Arthur, a partner and head of private client at Haysmacintyre, said that “with receipts from CGT having already doubled in the last six years, reaching a record high in the process, the government should be asking itself if now really is the time for any rise in CGT rates? Particularly during the cost of living crisis that families up and down the country are currently facing.”
“The Government should be wary about increasing rates at such a precarious time for an economy that is the midst of a recovery,” Arthur told City A.M. this morning.
She went on to explain that that the ongoing uncertainty following the Office for Tax Simplification’s recommendation to align CGT rates with income tax has likely contributed to the rise in CGT receipts.
Many individuals rushed through sales of assets earlier this year in the hope they would beat a speculated rise in CGT rates in the Spring Budget. This much talked about rise never materialised, Arthur stressed.
The recovery of the stock market and property prices since lockdown restrictions have eased in the last few months have also likely contributed to the trend of rising CGT receipts, she added.
Additionally, a new 30-day requirement to report and pay any applicable CGT on UK residential property, introduced only last year, has accelerated the timeframe in which individuals must pay the levy.
Arthur says the Government needs to move away from looking at ways to increase the tax take and should instead focus efforts on looking to grow the economy in the coming months.
“Although the huge levels of Government spending during the pandemic mean there is a large gap in the public finances to be filled, this is the wrong time to be hiking taxes, potentially stifling economic activity and growth in the process.”